This can be accomplished in two ways.
1. If you want to put an applique stitch around something you have cut out you would use one of you sewing stitches (the satin stictch for example) and sew around the edge of the cutout.
2. If the design is an embroidery applique design (done in the hoop) you will be walked though stitching, layering, cutting (you will remove the hoop from the machine for this step, but do not take the project out of the hoop itself), and stitching material that is being appliqued which will prompt you to cut the excess material before moving to the next stictch in the embroidery applique design.
Hope this helps.